Estimates of California Shale Oil Potential Cut By 96%

Reports of an upcoming oil boom in California based on massive Monterey shale formation now appear to have been premature. According to the LA Times, a 2011 assessment of the formation’s potential assumed that the challenges involved in extracting the oil would be comparable to other shale formations. While numerous exploratory wells have been drilled by small, independent companies, the major players remained skeptical.

John Staub, a petroleum exploration and production analyst with the Energy Information Administration (EIA) said, “Our oil production estimates combined with a dearth of knowledge about geological differences among the oil fields led to erroneous predictions and estimates.”

Staub called the Monterey formation “stagnant” when compared to the Bakken Shale in North Dakota and the Eagle Ford Shale in Texas, given the current technology. Future advances in extraction methods could allow the oil to be recovered economically.

This is another example of the over-exuberance that players in the oil industry and on Wall Street have demonstrated with regard to the potential of shale gas and oil. David Hughes, a geologist with the Post Carbon Institute has warned that the economics of the current shale gas and oil boom, could be setting us up for another large scale bubble that could have drastic consequences when it bursts.

Hughes had, in fact, produced an in-depth study of the Monterey formation last year in which he found that using current hydro-fracking technology to extract the oil would have disappointingly low levels of productivity. A 2011 report produced by Virginia-based consultancy INTEK suggested that the Monterey formation could yield as much as 15.4 billion barrels of oil, a number that represented a full two-thirds of the tight oil reserves in the continental US. Projections by USC based on that figure found that the resulting oil boom could generate 2.8 million jobs by 2020 and an additional $25 billion in tax revenues. Hughes concluded his report saying, “Californians would be well advised to avoid thinking of the Monterey Shale as a panacea for the State’s economic and energy concerns.”

Now the EIA has corroborated Hughes’ findings, slashing their initial estimates from 15.4 billion barrels of recoverable oil to 0.6 billion barrels, a reduction of ninety-six per cent.

Tupper Hull, a spokesman for the Western States Petroleum Association, took a more optimistic view. “We have a lot of confidence in the intelligence and skill of our engineers and geologists to find ways to adapt. . . . As the technologies change, the production rates could also change dramatically.”

Those new ways probably won’t come cheap, which means that they will have to wait until oil prices rise, which they eventually will as other sources become depleted. When that happens, the definition of “economically recoverable” will expand to meet those prices, as it already has to accommodate the current generation of shale oil extraction methods such as fracking, a prospect that was also once considered too expensive to pursue.

Of course, time is not necessarily on the side of those hoping for a California oil boom. With each passing year, dramatic progress is being made in numerous forms of alternative energy, whether it’s cellulosic ethanol, algae, hydrogen fuel cells, or high performance batteries to take the place of oil, or solar, wind, hydro, geothermal and tidal to take the place of natural gas.

Of course, given that the environmental impact of fracking is already suspect, it remains to be seen what side effects might accompany whatever kind of “super-fracking “ would be required to extract this oil. Meanwhile, as Seth B. Shonkoff, executive director of the nonprofit Physicians Scientists & Engineers for Healthy Energy said, “the narrative of fracking in the Monterey Shale as necessary for energy independence just had a big hole blown in it.”

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